Americans are increasingly worried about the implications of artificial intelligence for their future. According to a recent Quinnipiac poll, eight in ten Americans express concern over AI, while only a third report excitement. More than half believe AI will cause more harm than good in daily life, and seven out of ten think it will reduce job availability.
Despite this skepticism, Americans are about to have AI forced into their pension plans and investment portfolios, whether they like it or not. This will bind their financial futures to the high-stakes, multibillion-dollar race by tech moguls to develop machines that can mimic human thought processes and take over cognitive tasks.
SpaceX's Massive IPO Leads the Charge
This week marks the largest initial public offering (IPO) in history: Elon Musk's SpaceX, valued at $75 billion. Priced at $135 per share, the company will be worth a staggering $1.77 trillion, placing it among the top ten companies globally by market capitalization. While SpaceX primarily generates revenue from internet access, it needs the capital to fund Musk's vast AI ambitions, including launching data centers into orbit.
SpaceX's IPO is just the beginning. Both Anthropic and OpenAI have filed paperwork for their own IPOs later this year, which will add two more multitrillion-dollar AI behemoths to U.S. stock indices.
Index Funds Forced to Buy AI Stocks
Even investors who avoid buying these stocks directly will end up owning them through 401(k) retirement plans or market index funds. These funds, designed to reflect the entire market, are required to purchase AI shares in proportion to their weighting in indices like the Nasdaq and S&P 500.
Musk has lobbied for SpaceX to be quickly added to these indices, which would force index funds to buy the stock regardless of price, giving it a significant boost. The tech-heavy Nasdaq has already changed its rules to fast-track listings of behemoths like SpaceX, as has FTSE Russell. However, Standard & Poor's maintains its rules, meaning SpaceX must post a profit (which it hasn't yet), offer a minimum number of shares to the public, and wait about a year before joining the S&P 500.
If SpaceX follows the pattern of other large firms after their IPOs, about half of its shares could be trading openly by the time it joins the S&P 500 next year. This would give it roughly a 1.5% share of the S&P 500's market capitalization, forcing index funds to invest hundreds of billions into Musk's quest to become the world's first trillionaire.
Risks of a Tech-Controlled Future
This is a risky bet. Musk, who has already demonstrated his willingness to disrupt federal bureaucracy and cut aid programs despite potential human cost, will have sole control over a company that could underpin many Americans' retirement savings.
The so-called "magnificent seven" tech giants—Nvidia, Alphabet, Apple, Amazon, Microsoft, Meta, and Tesla—already account for more than a third of the S&P 500's market value. Adding SpaceX, OpenAI, and Anthropic will give tech billionaires even tighter control over Americans' financial futures as they pursue dystopian sci-fi dreams with little government regulation.
There may be a silver lining: holding AI stock in retirement plans could provide a hedge for workers displaced by AI, giving them a stake in the new economy. However, the balance of risks is troubling. The promise of AI boosting productivity and prosperity remains unfulfilled, while dystopian scenarios seem increasingly likely. Economic rewards remain distant, even as investors pour money into AI.
Market Volatility and Potential Collapse
Money eventually tires and moves on. The Nasdaq recently fell more than 4%, shaken by indications that a strong labor market might force the Federal Reserve to raise interest rates. This serves as a reminder that the AI-fueled rally in the Nasdaq and S&P 500 could abruptly end, perhaps just after Musk's trillionaire moment.
Americans don't know what an AI-heavy future will bring, but they have vivid memories of the pain caused by financial bubbles built on hubris. The 2008 financial crisis would pale in comparison to the devastation if the AI dream embedded in their investments turns into a nightmare.
